Preview
In this post, we introduce an Expert Advisor (EA) specifically designed for automated trading of the Australian Dollar versus US Dollar (AUDUSD) currency pair. This EA is unique in its approach, as it does not rely on traditional indicators or the commonly used OHLC (Open, High, Low, Close) points. Instead, the development is entirely focused on the instrument’s inherent volatility and the multi-year trading patterns observed between these two currencies.
What sets this EA apart is its exclusive use of fractals—a concept in trading that identifies recurring price patterns representing potential turning points—and the volatility of the AUDUSD pair. By avoiding performance optimization, the EA ensures traders gain an unbiased view of its raw capabilities, offering transparency and fostering confidence in its adaptability to various market conditions.
The development, testing, and analysis of this EA have been conducted under consistent parameters:
- Starting capital: €1,000
- Fixed lot size: 0.01
- Position types: Long and Short
- Martingale or Hedging: No
- Maximum leverage: 1:100
- Maximum open lots: 1
We provide an in-depth overview of the EA’s features, alongside detailed performance metrics derived from rigorous testing. These insights offer traders a comprehensive understanding of the algorithm’s behavior in diverse scenarios, empowering them to make informed decisions about its integration into their trading strategies.
The final part of the post displays the status of the trading system, which can be modified when the system is disabled or replaced. Quarterly subscribers can download the EA executable file for free, ready for seamless integration into the MT4 platform, as long as the system status remains active.
Development and Logic Description
To validate the performance of this Expert Advisor (EA), rigorous Out-of-Sample (OOS) testing was conducted. OOS testing is a critical method for evaluating trading strategies, as it uses data that was not part of the EA’s development process. This approach helps prevent overfitting to specific market conditions, ensuring that the EA can adapt effectively to real-world trading environments.
The EA underwent an extensive testing period spanning 8 years, utilizing historical data from two different brokers. Testing with multiple brokers—each offering distinct spreads—enhances the reliability of results by simulating various trading conditions. A spread range was carefully analyzed, with minimum values set at:
- Spread: 10.40 points
- Swap (Long): -1.70 points
- Swap (Short): -1.40 points
The trading strategy operates with a fixed lot size of 0.01, executing trades in both directions—long and short. This balanced approach avoids the formation of parabolic equity curves, a common sign of excessive data manipulation or over-optimization. Furthermore, no hedging strategies (opening positions to counteract losses) or martingale systems (increasing position size after losses) are used, ensuring a straightforward and sustainable trading logic.
The EA’s strategy revolves around the use of fractals, but it applies them in a unique, mean-reverting approach. In trading, fractals are patterns identified by at least five consecutive candlesticks, where a central bar (or candle) has the highest high or lowest low, flanked by two lower highs or higher lows on either side. While fractals are typically used to spot potential reversal points, this EA takes a different approach by opening trades that capitalize on price corrections after these turning points are identified.
Specifically, the EA opens positions at a fixed distance from the identified fractal:
- A long position is opened 1,766 points below an Up Fractal.
- A short position is opened 1,766 points above a Down Fractal.
This approach leverages the inherent mean-reverting behavior of the AUDUSD currency pair, aiming to capture price movements as they return toward equilibrium after reaching extreme levels.
Each trade executed by the EA is managed with precise exit rules:
- Stop Loss: 795 points
- Take Profit: 3340 points
- Break Even: 1240 points
- Trailing Stop: Adjusted to reduce potential losses when possible.
This methodical approach ensures that the EA operates with clear risk management parameters while leveraging the unique characteristics of fractals and the AUDUSD pair’s volatility.
From the image above, you can observe the operational behavior of this Expert Advisor in action.
Trading System Statistics
The backtest results indicate a high level of quality, with no errors or ambiguous bars encountered during the process. Furthermore, no discrepancies were identified between the backtests conducted using different brokers or terminals. This consistency highlights the EA’s robustness, even when operating with slightly different price feeds, ensuring reliable performance across various trading environments.
The most significant statistics of the EA can be summarized as follows:
- Sharpe Ratio: 0,27
- Profit Factor: 2,06
- Annualized profit (%): 6,47
- Maximum Drawdown: 3,74%
- Maximum Stagnation Period: 314 days
- Average Profit: 46,89 €
- Average Loss: -14,30 €
- Win/Loss Ratio: 0.38
Testing expert advisors firsthand is not only essential to verify their stability and functionality but also serves as a valuable exercise in understanding the disciplined approach and thorough methodology required to become a successful systematic trader.
The expert advisor can be downloaded directly from here: AUDUSD09012025.ex4
Status: Active
Best regards,
TradingQuant
